Satisfactory H1 2016 results Highlights of BankNordik's

Highlights of BankNordik's interim report for the first six months of 2016:

(The figures below have been adjusted for discontinued activities related to Vörður, unless otherwise indicated)

First half of 2016 vs. first half of 2015

• BankNordik reported operating profit of DKK 101m for the first half of 2016, an increase of DKK 4m compared to the first half of 2015 (+4%).
  • Net interest income was down by DKK 32m year-on-year primarily due to the controlled run-off of corporate lending in Denmark, but also due to pressure on interest margins and the lower investment portfolio income.
  • Fee and commission income was DKK 26m lower, owing to a pull-back in mortgage-broking activity to normal levels, less income from corporate activities in Denmark, and less income from asset management activity.
  • Net insurance income was up by DKK 10m in H1 2016, primarily due to lower claims.
  • Operating costs were down by DKK 23m from DKK 255m, partially due to the winding-up of the Danish corporate activities. FTE count is 26 less than at 30 June 2015.
  • BankNordik reversed DKK 4m in net impairment charges compared to net impairment charges of DKK 15m for the same period last year.
• BankNordik generated profit before tax, including discontinued activities from Vörður, of DKK 86m in the first six months of 2016 compared to DKK 73m for the same period last year.
• Non-recurring items in H1 2016 were DKK 12m versus DKK 14m in H1 2015.
• Value adjustments amounted to a gain of DKK 7m against a loss of DKK 16m in H1 2015.
• Discontinued activities before tax related to Vörður  amounted to a loss of DKK 9m compared to a profit of DKK 6m in H1 2015.

“The first half of 2016 progressed well and we now expect full-year results at the upper end of the Group’s guidance on operating profit before impairment charges,” commented BankNordik CEO Árni Ellefsen.

“A large part of the Danish corporate portfolio was settled by June 2016 and the Vørður deal is expected to close in the second half of 2016. Impairment charges remained extraordinary low during second quarter, which confirms BankNordik’s dedication to firm and systematic credit policy guidelines,” said Mr Ellefsen.

Q2 2016 vs. Q1 2016

• Operating profit in Q2 2016 was DKK 50m, flat compared to Q1 2016.
  • Net interest income was down by DKK 15m in Q2 2016 compared to Q1 2016, primarily due to the winding-up of corporate activities in Denmark, but also because of increased pressure on interest margins.
  • Fee and commission income was up by DKK 6m compared to Q1 2016 due to dividend income from the investment portfolio.
  • Net insurance income was up by DKK 3m compared to Q1 2016.
  • Operating costs were down by DKK 2m from DKK 117m.
  • Loan impairment charges were reversed DKK 3m compared to reversed charges of DKK 1m in Q1 2016.
• BankNordik recorded a profit before tax, including discontinued activities from Vørður, of DKK 61m in Q2 2016 compared to a profit of DKK 25m in Q1 2016.
• There were no non-recurring items in Q2 2016 compared to non-recurring items of DKK 12m in Q1 2016.
• Value adjustments amounted to a gain of DKK 9m in Q2 2016 compared to a loss of DKK 3m in Q1 2016.
• Discontinued activities before tax relating to Vörður  amounted to a profit of DKK 1 compared to a loss of DKK 10m in Q1 2016.

Update on the sale of Vörður and the winding-up of corporate activities in Denmark

As announced in June, BankNordik has received approval from the Icelandic central bank and the Icelandic FSA to sell all shares in Vörður. The final regulatory approval needed is from the competition authorities, which BankNordik expects to receive in the second half of 2016.

The winding up of corporate banking activities in Denmark has seen steady progress and approximately DKK 1 billion in book value had been settled by the end of June 2016. 

The sale of Vörður and the controlled run-off of corporate activities in Denmark are expected to generate a total capital relief of approximately DKK 300m, which amount is intended for distribution to the shareholders in excess of ordinary dividends as per the Group’s dividend policy. The Board of Directors expects to propose the distribution of extraordinary dividends at BankNordik’s 2017 Annual General Meeting. The proposal will be made with due consideration for the announced target of a CET1 capital ratio of not less than 13%.

Share buy-back programme initiated

On 30 May 2016, the Group initiated a share buy-back programme, enabling the acquisition of own shares up to a market value of DKK 33m. The program runs until year-end and as of 28 July 2016, the Group had accumulated 56,194 shares under the programme, amounting to a total transaction value of DKK 6.4m.

Hybrid and subordinated debt

On 24 June 2016, BankNordik redeemed its hybrid and subordinated bonds for a total value of DKK 450m, while simultaneously issuing new CRD IV compliant Tier 2 capital in the amount of DKK 225m. The coupon rate of the newly issued subordinated debt was 5.0785% p.a., based on the 5-year fixed Danish swap rate plus a margin of 4.75% p.a. The net annual interest expense savings resulting from the transactions will amount to approximately DKK 20m.

Capital ratios

As of 30 June 2016, BankNordik had a total capital ratio of 17.1%, leaving a margin of 8.1 percentage points to the Bank’s capital requirement of 8.9%.

The CET1 capital ratio was 15.1% at 30 June 2016 as compared to the Bank’s target of 13%.

Outlook for 2016

Management narrows the FY2016 guidance on profit before impairment charges, non-recurring items, value adjustments and tax from the range of DKK 150-190m to the range of DKK 160-190m (H1 2016: DKK 97m).

Net impairment charges on loans for 2016 are expected to be in line with the level of 2015 (DKK 20m). For the first six months of 2016, net impairment charges were a reversal of DKK 4m.

This guidance is generally subject to uncertainty and will depend on economic conditions, including possible central bank monetary policy measures.

For additional information, please contact:

Árni Ellefsen, CEO, tel. (+298) 230 348

BankNordik has banking activities in Denmark, Greenland and the Faroe Islands and insurance activities in the Faroe Islands and Iceland. Founded in the Faroe Islands more than a century ago, the Group has total assets of DKK 16.4bn and 464 employees. The Bank is subject to the supervision of the Danish Financial Supervisory Authority and has a dual listing on Nasdaq Iceland and Nasdaq Copenhagen.

Appendix: Financial highlights and comparative figures are provided below.

Financial highlights

* Excluding non-recurring items and value adjustments.

Further details are available in the interim report.